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Outcome of Supervisory Review and Evaluation Process by the ECB and LHV Group's Internal Capital Targets

Teade

In December, the European Central Bank (ECB) presented AS LHV Group with the
outcome of Supervisory Review and Evaluation Process (SREP) for capital adequacy
calculation. Previously under the supervision of the Estonian Financial
Supervision and Resolution Authority, AS LHV Group and its subsidiary AS LHV
Pank have been subject to direct supervision by the ECB since 1 January 2023.

According to the ECB's decision, Pillar 2 capital requirements and guidelines
for LHV Group will remain at the existing level. An additional requirement for
own funds in the amount 3.40% applies to LHV Group, of which at least 1.91% must
be covered by Core Tier 1 own funds and at least 2.55% by Tier 1 capital.

In comparison with the previous evaluation, the Bank of Estonia raised the
counter-cyclical buffer from 1 percentage point to 1.50. The counter-cyclical
buffer is one of the four regional buffers that are set for meeting the
objectives of macroprudential supervision and the flexibility of establishing it
is left to each member state.

The Supervisory Board of LHV Group, considering the ECB's decision and adding
internal buffers, decided to set the total own funds target ratio at 19.70%,
Tier 1 ratio at 16.85% and Core Tier 1 ratio at 14.70%.

Underneath is the target split into components:

+------------------------------------------+------+------+---------------------+
|                Indicator                 |CET 1 |Tier 1|Total own funds ratio|
+------------------------------------------+------+------+---------------------+
|Basic requirement                         |4.50% |6.00% |        8.00%        |
+------------------------------------------+------+------+---------------------+
|Pillar 2 capital requirement (P2R)        |1.91% |2.55% |        3.40%        |
+------------------------------------------+------+------+---------------------+
|Total SREP Capital Requirement (TSCR)     |6.41% |8.55% |       11.40%        |
+------------------------------------------+------+------+---------------------+
|Capital conservation buffer               |2.50% |2.50% |        2.50%        |
+------------------------------------------+------+------+---------------------+
|Systemic risk buffer                      |0.00% |0.00% |        0.00%        |
+------------------------------------------+------+------+---------------------+
|Countercyclical buffer                    |1.50% |1.50% |        1.50%        |
+------------------------------------------+------+------+---------------------+
|O-SII buffer                              |2.00% |2.00% |        2.00%        |
+------------------------------------------+------+------+---------------------+
|Total combined buffer                     |6.00% |6.00% |        6.00%        |
+------------------------------------------+------+------+---------------------+
|Total general capital requirement         |12.41%|14.55%|       17.40%        |
+------------------------------------------+------+------+---------------------+
|Pillar 2 guidance                         |2.00% |2.00% |        2.00%        |
+------------------------------------------+------+------+---------------------+
|Internal buffers                          |0.29% |0.30% |        0.30%        |
+------------------------------------------+------+------+---------------------+
|Total internal capital requirement risk   |      |      |                     |
|appetite limit                            |14.70%|16.85%|       19.70%        |
+------------------------------------------+------+------+---------------------+


LHV Group is the largest domestic financial group and capital provider in
Estonia. LHV Group's key subsidiaries are LHV Pank, LHV Varahaldus, LHV
Kindlustus, and LHV Bank Limited. The Group employs over 1,060 people. As at the
end of October, LHV's banking services are used by 415,000 clients, the pension
funds managed by LHV have 125,000 active clients, and LHV Kindlustus protects a
total of 164,000 clients. LHV Bank, a subsidiary of the Group, holds a banking
licence in the UK and provides banking services to international financial
technology companies, as well as loans to small and medium-sized enterprises.



Marthi Lepik
Communication Specialist
Phone: +372 5666 2944
Email: marthi.lepik@lhv.ee (mailto:marthi.lepik@lhv.ee)